Making Music with Global R&D

Expansion does not always bring growth. In fact, with many companies globalizing their R&D operations, it can bring just the opposite. As new sites and new talent are acquired and the R&D workforce becomes increasingly dispersed, the capabilities required for full productivity can be easily dissipated. And operational performance can suffer greatly, with time to market increasing by as much as 30 percent and schedule slippage by 20 percent.

Less-than-optimal R&D productivity has many causes—poor planning, insufficient coordination, fractured governance, and a culture skewed to local norms—all of which reflect a company’s inability to manage global R&D as a strategic asset. The problem manifests itself in various ways, including:

Project teams spread across more than three sites

Multiple sites with less than a critical mass (typically 200 people)

Resources in low-cost countries less than half as productive as domestic resources

Worldwide sites with more than 20 percent attrition

Employee complaints regarding a site’s lack of mission

Often these symptoms go unrecognized because companies globalize their operations in an ad hoc fashion. But, if more than two symptoms exist, R&D productivity is likely to suffer. Left unaddressed, symptoms can cripple a company’s long-term performance and, in extreme cases, take years to fix.

Companies seeing a decline in productivity can greatly benefit from managing their global R&D operations comprehensively. A global R&D operations (GRDO) framework that encompasses both strategy and execution is critically important for making the most impactful operational changes in the short term—while laying the groundwork for stronger performance over the long term. In our experience, companies that take this approach have lower R&D costs, greater access to talent, and better performing teams.

Composing the Operational Strategy

A comprehensive operational strategy clarifies goals, ranks priorities, and defines a path forward. The strategy should go beyond cost considerations to include factors like customer and market access, proximity to key partners and suppliers, and access to specialized talents. With these essential elements in place, it is possible to define preferred site locations and the components that enable local ownership and execution such as capital investment, risk management strategies, and a modular product/service architecture.

Orchestrating the Operating Model

Delivering against the strategic goals requires an aligned operational model, with governance and structural elements that support comprehensive and coordinated global R&D. Infrastructure and technology support become ever more essential when the R&D team is globally dispersed, so the company must be sure to have the latest capabilities in resource management, communications, and collaboration tools. The operating model also must guarantee that cultural nuances are observed around the world. Global cultural awareness training, expatriate assignments, and regular senior management visits to sites worldwide are all critical in this regard.

Harmonizing Execution

Even the best strategy and model do not guarantee effective execution with so many moving parts in play. Effective orchestration requires mechanisms like site charters and profiles, which provide each R&D site with a distinctive identity and a clear path forward. Multi-site project management, in conjunction with best practices for moving work between sites, also facilitates efficient and predictable execution. Finally, a limited set of metrics related to the GRDO framework ensures that relevant operational performance is monitored and that its impact on the business is visible.

Global R&D operations are here to stay. But going global shouldn’t be a piecemeal process. A comprehensive approach to strategy and execution will ensure R&D expansion efforts yield the maximum ROI, in both the short and the long term.